Global Retail Expansion Tilts to Digital

Retailers appear to be focusing their expansion efforts more on local digital initiatives and less on more traditional means of market entry like new stores.

That’s among the conclusions of a study by Accenture’s retail practice that found a group of 489 retail firms around the world staged just 17 new market entries in the three months ended Jan. 15, down more than half from the 43 entries undertaken in the third quarter of last year. Preliminary data for the three months ended April 15 show a pickup from fourth-quarter results, but not to the heights achieved in the third quarter.

Apparel retailers were the dominant force in retail globalization in both 2012 periods and registered a proportionate decline in new market penetration as well, accounting for five of the 17 entries in the winter period versus 15 of the 43 in the earlier quarter.

“The operating model and supporting infrastructure required by retailers to meet their customers’ expectations for a seamless experience across all available channels is both time- and capital-intensive,” said Chris Donnelly, global managing director of Accenture’s retail practice. “These results suggest that retailers are focusing more on getting it right at home before exporting it internationally. Part of their effort to integrate the e-commerce experience into the main business may require a reorganization of the roles and responsibilities of the company’s top management team, which may be reflected in the decline seen in international expansion as retailers turned their attention to strengthening their internal structure.”

Six emerging markets in Asia — China, Indonesia, Kazakhstan, Malaysia, Pakistan and Thailand — were responsible for 13 entries during the fall study, but only two in the final quarterly tally of 2012. China had one entry in both the fall and winter studies and, in preliminary data, one for the three months ended April 15. The components of the BRIC markets other than China — Brazil, Russia and India — had a total of just two entries in the fall study; four in the winter report, three of which were in Brazil; and two in the data collected so far for spring.

“We expected a preponderance of entries into the BRICs, particularly China, since there are challenges entering India and, with its incredibly high import duties, Brazil,” Julian Allen, global retail research lead for Accenture and author of the study, told WWD. “Clearly, that wasn’t the case.”

Despite the high cost of entry and its status as what Donnelly called “incredibly competitive and overstored,” the U.S. attracted five entries in the third quarter, a number that slipped to just one in the fourth quarter.

Over the final six months of last year, U.S. companies expanded into 21 new markets — 14 in the first study and seven in the more recent one.

“Even though both markets are incredibly well developed, there’s still a clear desire by retailers to take on the U.S. and the U.K. as well,” said Allen.

He pointed out that Accenture has already recorded 25 entries for the quarter that ended April 15, a figure that falls between the third- and fourth-quarter numbers. “The road to internationalization is paved with good intentions but also marked by more than its share of false starts and withdrawals,” Allen noted.

All stores surveyed had 2011 sales of at least $750 million. Means of entry covered in the quarterly study included Web site launches, joint ventures and franchise expansion, as well as the opening of company-owned stores.

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